Wednesday's Federal Reserve Meeting Announcement

The Federal Reserve Open Market Committee voted today to keep the target interest rate unchanged at a range of zero to 0.25 percent and reiterated that economic conditions are likely to warrant "exceptionally low levels for the federal funds rate at least through mid-2013." Policy makers cited slow economic growth and continued weakness in overall labor market conditions, as well as a modest increase in household spending. It was also noted that inflation appears to have moderated and longer-term inflation expectations remain stable.

Additionally, as many expected, the committee announced that it will pursue the plan dubbed "Operation Twist" by extending the average maturity of its securities holdings, in an effort to put downward pressure on longer-term interest rates and support a stronger economic recovery. The committee will sell $400 billion of Treasury securities with remaining maturities of three years or less and purchase an equal amount of Treasury securities with remaining maturities of six to 30 years, by the end of June 2012.

To help support the housing market, the committee also said it will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.

There were three dissenting voters who did not support additional policy accommodation at this time.

The Federal Reserve Open Market Committee voted today to keep the target interest rate unchanged at a range of zero to 0.25 percent and reiterated that economic conditions are likely to warrant "exceptionally low levels for the federal funds rate at least through mid-2013." Policy makers cited slow economic growth and continued weakness in overall labor market conditions, as well as a modest increase in household spending. It was also noted that inflation appears to have moderated and longer-term inflation expectations remain stable.

Additionally, as many expected, the committee announced that it will pursue the plan dubbed "Operation Twist" by extending the average maturity of its securities holdings, in an effort to put downward pressure on longer-term interest rates and support a stronger economic recovery. The committee will sell $400 billion of Treasury securities with remaining maturities of three years or less and purchase an equal amount of Treasury securities with remaining maturities of six to 30 years, by the end of June 2012.

To help support the housing market, the committee also said it will now reinvest principal payments from its holdings of agency...Read More